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Can a management group establish a retirement plan?


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Happy New Year everyone.

Any help is appreciated.  If more information is needed let me know.

Around 50 doctors/partners in a medical management group.  Each partner receives a K-1 of around $100,000 annually from the management group.

The same doctors are also part of a very large regional hospital network from which they are maxed out in that the 401k and DB plan through the hospital.  Their compensation directly from the hospital is over 7 figures.

Can they establish a retirement plan through the management company and, assuming no discrimination problems, max out with a 401k and/or cash balance plan as well?

Thank you

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Your use of the term "management group" is confusing, because there is a type of affiliated service group called a management function group, but that is not what you were asking about. I'll refer to the organization with the 50 partners as the partnership/LLC.

The short answer is, if they are unrelated employers then separate 415 limits apply. When you say they want to max out in both 401(k) plans, presumably you mean the annual additions limit in both plans, since the 402(g) limit applies on an individual basis.

The tricky part is determining if they are unrelated employers. With that many partners, it is unlikely to be a controlled group. It is possible that an ASG exists though. Do any of the 50 partners of the partnership/LLC have any ownership in the network? What kind of entity is the network? Does the partnership/LLC receive any income from performing services for the network? There are probably other relevant questions - determining ASG status can be complex.

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  • 5 months later...

This is a new but related question:  Dr. is 100% shareholder of his own S-corp; invests in two dialysis companies through his former SEP-IRA.  Each investment is under 5% of the total ownership of the dialysis companies.  Dr. refers some patients to each dialysis clinic, but uses a total of 6 different clinics.

In order to see whether we have an ASG, I've determined that the Dr's Corp must be the A-Org., and the question is whether a dialysis clinic is de facto either a Professional Service Corp or a "Service Organization"  or not, since dialysis machines are pretty capital-intensive.

I have been unable to determine the answer by researching the individual names ofthe clinics, and so if there is not a de facto determination, does anyone know how to determine whether an ASG exists?

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12 hours ago, Barbara said:

In order to see whether we have an ASG, I've determined that the Dr's Corp must be the A-Org., and the question is whether a dialysis clinic is de facto either a Professional Service Corp or a "Service Organization"  or not, since dialysis machines are pretty capital-intensive.

An organization engaged in the field of health is automatically a service organization for the ASG rules, regardless of whether capital is a material income-producing factor.

The best way to find if an ASG exists is to hire an ERISA attorney to make that determination for you.

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